What is a Buy-To-Let Mortgage?

A buy-to-let mortgage is a mortgage specifically for the purpose of purchasing a home to let out to tenants. You can not live in a buy-to-let property you own if you’ve used a buy-to-let mortgage to fund the purchase. 

It is considered a low-risk and long-term investment with many benefits 

Check out this page that explains all you need to know about earning a profit while buying to let. 

However, as you’d take care of the maintenance of a residential property, you’d also have to manage a buy-to-let property if you have tenants residing in it, or alternatively, hire a service that manages the property on your behalf. 

Unlike residential mortgages, there are several additional steps to getting a buy-to-let mortgage - for example, providing information such as rental yield. Read on to learn more about the eligibility criteria of a buy-to-let mortgage.

Eligibility Criteria for Buy-To-Let Mortgages

Unfortunately, not everybody is eligible for a buy-to-let mortgage. There are several factors that can impact a lender’s decision to offer you a mortgage. Certain factors can also influence the lender’s decision, meaning you may be offered the Bank of England base rate or higher interest rates. 

Read on for the mortgage criteria for buy-to-let mortgages, including age, employment, income, and rental yield.

Age

The minimum age to get a mortgage is 18. However, some lenders will only provide buy-to-let mortgages to those above the age of 21. Some lenders will even have an age limit of 25, although the minimum age of 21 is more common. 

What many people don’t realise is that many lenders also have a maximum age for buy-to-let mortgages. Your bank or lender may not offer you a buy-to-let mortgage if you are over the age of 75 - although many lenders will lend to people up to the age of 85.

Employment

Your current employment status can also determine the mortgage offer you may receive. Your lenders will want to know how you earn your money - whether you’re self-employed or in full-time employment. You’ll be required to provide proof of income, regardless of your profession. 

Many lenders have no issues accepting people who are self-employed, as being a landlord is essentially being self-employed and running your own business.

Income

Your income may also be a deciding factor for lenders - however, it doesn't play as much of a role in buy-to-let mortgages as residential mortgages. Unlike with residential mortgages, your personal affordability doesn’t always determine the amount you can borrow. 

That being said, some lenders won’t offer you a mortgage unless you have an income of at least £25,000.

Rental Yield

The minimum rental yield only applies to buy-to-let mortgages. Your lender will want to know the rental potential of the property you’re looking to purchase. 

In most cases, you’ll use your rental income to make the mortgage payments. This is why lenders will want an estimation of your rental income.

Deposit Criteria

Arranging your mortgage and arranging your deposit are two separate things. For residential mortgages, you are often required to provide a 10% deposit. However, for buy-to-let mortgages, your mortgage lender may require a higher amount. 

Many lenders expect a 25% deposit for a buy-to-let mortgage. This is because most deals for buy-to-let mortgages have a 75% LTV (loan to value). 

Although you can find lenders that will allow a 20% deposit, most lenders require a minimum of a 25% deposit for this type of mortgage - and only allow 20% deposits for people with landlord experience.

Do You Need Experience Being A Landlord?

You may be wondering whether having landlord experience will impact your lender’s decision to offer you a buy-to-let mortgage. Certain factors regarding landlord experience can impact your mortgage assessment - for example:

• Whether you’re a first-time buyer 
• Whether you’re a first-time landlord 
• Whether you own one or more buy-to-let properties 
• Whether you have a property portfolio

Buy To Let Help

You can check out our buy-to-let page here, with all the relevant information on how we can help you. At LTC Mortgages, we can provide you with guidance throughout the buy-to-let process, from the mortgage application to completion. 

Likewise, if you’re looking to remortgage, we can find the best deals and offer you support and advice throughout the process, ultimately lowering the cost. 

Contact us now to compare the best buy-to-let mortgage deals, and to get the ball rolling on your mortgage.